Crocs, Inc. trimmed its Q4 losses on higher sales primarily due to its successful expansion of its consumer-direct business and cost controls. Management attributed broad acceptance of key new styles for a 46% increase in backlog at year-end. The big surprise though was that the architect of the recent turnaround, John Duerden, announced he would retire from his role as president and CEO after about roughly a year on the job.  COO John McCarvel has been promoted to president and CEO, effective March 1.

 

On a conference call with analysts, Duerden, formerly Reeboks CEO from 1990 to 1995, said McCarvel played a key role in the Crocs recovery over the past 18 months and also has the benefit of being somewhat younger than I am, and is well equipped for leading a truly global enterprise.

 

The companys net loss was lowered to $11.4 million, or 13 cents a share, in Q4, versus a loss of $34.7 million, or 42 cents, in Q4 2008. Excluding special items, the loss was 4 cents for Q4 versus 15 cents in Q4 2008. Revenues rose 7.9% to $136 million.

 

By segment, sales at company-owned stores increased 26% to $43.8 million. CROX had 317 locations at the year-end, up from 279 at the end of 2008. Internet sales grew 20.6% to $15.3 million. Wholesales sales were down 2.1% to $77 million, but marked significant improvement versus declines of 45% in Q109, 28% in Q209 and 15% in Q309.

 

Average footwear selling prices for Q4 2009 were $18.27, down compared to $19.07 in Q4 2008 but trending well-above 2009s average of $16.60. Core products represented 28% of sales-while  the Cayman and Beach lines represented 11% of sales.  The Crocband Clog was pre-launched in limited quantities and the sell-through at retail has reportedly been solid.

 

By region, sales in the Americas were down 3.5% to $68.8 million in Q4.  U.S. same-store sales increased 4% and were positive for the full year. In Europe, sales increased 51.2%, to $16.5 million, while sales in Asia climbed 15.5% to $50.5 million for the quarter.

 

Gross margins dipped 10 basis points to 44.3% of sales. Cost of sales included $1.3 million in restructuring costs related to the closure of warehouse space in Europe.  SG&A expenses were cut to 51.7% of sales from 77.4% in the prior-year quarter due to the consolidation of warehouse space, supply chain rationalization, and by sourcing higher import duty products from NAFTA duty-free manufacturing facilities in Mexico; and favorable changes in product mix, primarily driven by its consumer direct channel.

 

Looking ahead, Crocs expects Q1 revenues to rise about 16% to between $155 million and $160 million from $135 million Q1 last year. EPS are expected to break even.

 

On the call, McCarvel said in 2009 the company stabilized the business by strengthening its balance sheet, exiting marginal distribution, reducing expenses, improving production processes and service levels, and recruiting design talent to re-energize the line.

 

For 2010, one focus will be getting the U.S. wholesale business growing again with a major consumer-focused marketing campaign entitled Feel the Love that will launch in the U.S. in mid-2010, along with selected cooperative ad campaigns beginning in April of 2010.  Overall, a major focus will be on moving the company toward a three-season footwear merchandising model.